What you need to know about tax invoice software

When it comes to tax invoice software, you need to firstly understand what a tax invoice is and the difference between tax invoice and non-tax invoice.

Let’s begin from the fundamentals, an invoice is often a billing document under which billing is done for a particular transaction, it consists of itemized list of products and services transacted, take note that it is different from a statement of accounts, which lists all the billing invoices issued on account of a particular client for a particular time. Essentially every invoices consist of some fundamental elements, like invoice date, invoice number, itemized list of all the goods and services transacted and amounts. Invoices comes with different kinds too like credit memo, debit memo, commercial invoice, pro-forma invoice etc. In today’s marketplace, there can be lots of invoice software and system that may be obtained to manage them.

From a taxation standpoint, there are two kinds of invoices, namely tax invoice and a non-tax invoice. A tax invoice is an invoice which you issue to a buyer or customer for a purchase made that is covered by sales tax. And a non-tax invoice, sometimes also known as standard invoice, is an invoice that a seller gives to a purchaser for purchases that are not covered by sales tax.

In some countries, if someone is registered for VAT (value added tax), or GST (goods and service tax), then whether she or he is sole trader or limited company, its required by tax law to put all the related tax information connected with sales on the invoices that they produce for their sales transactions. Every sale ends in a separate invoice, therefore, it is considered best to set records and invoices properly for VAT or GST every time business starts. Invoice Software _ Tax Invoice Software

For those who are only starting their small companies, they could find it a little complicated when it comes to tax invoice or non-tax invoice. In fact, the key is to have the right knowledge in relation to what types or transaction items are subject to sales tax, and at what tax rate these transactions be taxed. Specialists like accountant will find no problem with that, but for ordinary people, it might be just a good idea to seek the help of an automatic software system which have already set things up.

So far we have talked in regards to the sales standpoint in regard to tax invoice, from expense perspective, you also need to maintain a solid track of tax invoices for book keeping reasons. Most business expenses, but not all, have a portion of VAT (or GST) that needs to be identified. When you are doing your book keeping and entering your expenses into your invoice software system, you have to ensure you record the right amount of VAR (or GST) for every expense, and identify expenses that are VAT (or GST) free, you cannot simply assume that all expenses are subject to standard VAT (or GST) rate, for example insurance (the stamp duty portion is tax free), bank fees and food.

Nowadays, many of the tax invoice software out there should be able to handle the management very easily, you simply need to flag an item as tax-able or non-taxable, then the system will do the calculations for you automatically. By right a superb tax invoice software also needs to give you the flexibleness of selecting multiple tax rates because it isn’t correct to assume the tax rate will never change. And in some countries there a different tax rates for different types of goods or products.

In countries in Australia and New Zealand, businesses from time to time prefer to sell goods or services to their clients using a so called “Tax-included” price, from the customers perspective, the vendor is paying the tax on their behalf, but in essence it’s not, from the scientific standpoint, it is simply a lowered selling price or a discounted selling price. It is often not easy to calculate the tax-included item amount by hand, but using a properly designed tax invoice software, this is achieved very easily.

To find such software systems, if you haven’t explored the web yet, you should do so, the internet is a vast resource of software programs, you can also find sample tax invoice forms and tax invoice templates, never take the hassle to create one from scratch, or paying someone to create it for you, because you will find free software systems as well.

Author: John FH, Small business software, accounting software, invoice software expert. Click invoice software free to view his revolutionary DIY invoice software video.